Economic impact assessment of the Inflation Reduction Act (IRA)

• Economic growth: mitigating and adapting to climate change aids growth by avoiding damages and reducing pollution, which improves the health and productivity of workers. Government funding for R&D spurs innovation in clean technology, with spillover benefits. Less reliance on fossil fuels also means less exposure to price volatility in those markets, which can initiate and exacerbate recessions.
• The IRA’s economic case: modeling results from academic research show that there is a strong case for the IRA. Lower bound estimates of the local air pollution health benefits range from US$20 billion to US$49 billion in 2030 alone.
• Impact on disadvantaged communities: growth in renewable energy facilities is fastest in so-called Energy Communities, showing that the clean energy transition can benefit communities that have historically been reliant on fossil fuels for economic vitality. Since the IRA was passed in December 2023, 75% of new clean facility announcements have been made in counties with median incomes below the U.S. aggregate median income, and 84% in counties with college graduation rates below the U.S. aggregate college graduation rate.

To support the Biden-Harris Administration’s approach to climate change, the U.S. Treasury appointed the first-ever Climate Counselor and established the Climate Hub in the Office of the Secretary to help strategize concerning the Treasury’s work on climate, and to coordinate information-sharing across the Department, among other things. The Climate Hub was part of an intentional effort to coordinate rather than centralize the Treasury’s climate work. Note that disbursement of funds appropriated through the IRA has been paused under the Trump-Vance Administration via Executive Order 14154 on Unleashing American Energy.